This article is from the Investing Articles: Public Offerings: IPO and DPO series.
SCOR Report is the only publication that covers all aspects of small business finance. We do it in 14 issues a year at a cost of $280. Each month, we canvass the state regulators to find out the latest developments in each state. We keep up with what has happened to companies which have filed SCOR or Regulation A offerings and we monitor companies that have sold securities under other federal exemptions as well. We track developments at the Small Business Administration, the federal and state governments, changes in banking regulations and small business itself to find out how companies are funding their operations. What works? What doesn't?
Selling securities may prove impossible if the issuer and his advisors don't understand what motivates people to invest in small corporate offerings. Historically, only about 30% of the companies that have filed offerings, sell the minimum amount they require to execute their plan. How would you sell equity in a start up high tech company? A sandwich shop? A company that makes replacement parts for machines that make cement blocks? An insurance company? A real estate company? A bank?
SCOR Report tells you:
How companies in those businesses succeeded. How they got the best coverage of prospects in several states at the least cost. What successful issuers say about where to find investors.
SCOR Report also answers the basic questions such as:
Do you need an accountant?
Almost invariably and the sooner the better, if for no other reason than to set up a system for keeping books so that when it is time to do an audit or even a review of the financial statements, the information is available.
Do you need a broker/dealer and if so, who has handled SCOR and Regulation A offerings?
So far, only 150 of the 1,150 or so DPOs that have registered used a broker/dealer. Not all of those offers have broken an escrow. Some offers with broker/dealers have even failed to become registered.
SCOR Report (http://www.scor-report.com) has a database of broker/dealers who have handled SCOR and Regulation A deals, and the companies they have represented. Those files are available for $100,000.
Do you need a lawyer or is the SCOR form truly
You do need a legal opinion as to the validity of the offer, which does not require an attorney specialized in securities law. Beyond that the answer depends on the issuer's experience, knowledge and patience.
Some regulators have told us they are more comfortable if an attorney they have worked with before prepared to work closely with issuers to produce an acceptable offering document, although there are definite limits to what they can do. However, a patient and receptive issuer can usually produce a document that is acceptable to the regulator without a great deal of attorney time.
Whether that document is in the issuing company's best interests is another matter. The regulator's job is to protect the public. The issuer has to look out for himself.
SCOR Report maintains a file of attorneys who have handled SCOR and Regulation A offerings, and the companies they have represented. If you wish to consult an attorney familiar with the process, these files are also available for $100.00.
Do investors have to meet specific income and wealth standards to be allowed to invest in DPOs? In some states yes, in most no.
Which states accept the SCOR form?
All except Alabama (under consideration), Delaware, District of Columbia (has no securities laws), Florida, Hawaii, and Nebraska.
Can investors sell their securities if they
Although DPO securities are freely transferrable they are generally illiquid. There are, however, a number of ways of creating at least some sort of secondary market for them.
What must the president of a company do to be able to sell
securities in his company?
The requirements vary from state to state, but in general, if he does not get an additional fee, most states will waive or minimize their broker/dealer requirements.